Wages are heating up. And it’s also now starting to show up in the data: The wage component in the fuel for persistent big inflation.
By Wolf Richter for WOLF STREET.
The Fed’s “Beige Book” – an informal narrative of the economy as depicted by large and small companies in the 12 Federal Reserve districts – listed 78 references to various aspects of strong wage pressures and bonus offers to hire and retain workers, amid concerns of “wage inflation,” with some colorful descriptions of how even sharply higher wages (+20%) sometimes fail to attract enough workers, even if it maxes out the business model.
By comparison, in the January Beige Book contained only 15 references, compared to 78 in October, but some wage pressures already cropped up, focused mostly on bonuses and some pressures to raise wages.
And there was even an instant classic from the San Francisco Fed, namely the “wage war.”
“Wage growth climbed further due to intensified competition for talent and workers’ willingness to switch jobs, with one contact from the banking sector characterizing it as a wage war,” the Beige Book from the San Francisco Fed said.
“Apart from increasing starting salaries as much as 20 percent by some employers’ estimates, most contacts across sectors reported offering hiring bonuses, gift cards, and other incentives,” it said.
Here are the standouts for January and October. To be included, a reference has to have a strong qualifier of some sort – “slight wage increases” doesn’t cut it. The two columns on the right show the number of times these types of references occurred in the Beige Books of January and October:
|Wage pressure references and how often they occurred||Jan.||Oct.|
|offer retention bonuses, hiring bonuses, signing bonuses, general bonuses, stay-on bonuses,||7||11|
|wage pressures, pressure on wages: strong, upward, remained high, rising, increased, intensified||4||9|
|raise wages, raised wages, raise wage offers, give raises, raising wages||0||8|
|wage increase, wages increased: sizeable, preemptive; “Multiple contacts cited entry-level wage increases of 15 to 20 percent”; “agriculture employer reported that a 20% wage increase still left them with significantly fewer workers than they wanted”||0||6|
|higher wages, wages were higher: “higher wages were not always attracting more applicants.”||0||6|
|wage growth: strong, robust, highly elevated, climbed further||0||5|
|wages were on the rise, wages continued to rise, increase strongly, moderately||0||5|
|offer perks: “flexible work hours”; “flexible work arrangements”; “non-wage perks”; more vacation, nonmonetary incentives;||3||8|
|increasing starting wages & starting salaries||0||3|
|wages and prices increased strongly, continued to rise,||0||3|
|increased wages, increasing wages||1||2|
|pay: “offered higher starting pay”; “giving additional pay raises on top of regular annual increases to retain their existing workforce”; “using more premium pay for temporary workers as they sought to offset labor shortages”||0||3|
|wage war: “intensified competition for talent and workers’ willingness to switch jobs, with one contact from the banking sector characterizing it as a wage war”||0||1|
|wages and price levels climbed||0||1|
|wage and price growth remained highly elevated||0||1|
|high asking wages: “did not hire applicants because asking wages were higher than their business models could support”||0||1|
|“wages were on the rise for existing workers as well”||0||1|
|“heightened competition for workers pushed wages up”||0||1|
|“concerned over … wage inflation”||0||1|
|compensation: “many firms reportedly enhanced other parts of compensation (such as health insurance, tuition reimbursement, and time off) to attract and retain workers”; “workers shifting sectors to pursue higher compensation and preferred working conditions…||0||2|
|Total number wage pressure references||15||78|
Some of these wage pressures started to show up in the data:
Over the past six months (April through September), the average hourly earnings of all private-sector employees increased by 2.9%, which amounts to an annualized rate of 5.8%, according to Bureau of Labor Statistics data.
In September alone, the average hourly wage jumped by 0.62% from August, which would be an annualized rate of 7.4%.
This outpaced the increases over the prior six months (October 2020 through March 2021), when the average hourly earnings rose by only 1.6%, for an annualized rate of 3.2%.
The past few months show that wage increases are heating up and are starting to filter into the wage data. If these wage increases continue on this track – the Beige Book indicates that they have a good chance of doing so – the wage component in the fuel for persistent inflation would be in place.
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